Magnolia Oil & Gas has announced its financial and operational results for the third quarter of 2022.

Third Quarter 2022 Highlights:

• Magnolia reported third quarter 2022 net income attributable to Class A Common Stock of $245.5 million, or $1.29 per diluted share. Third quarter 2022 total net income increased 79% to $287.0 million and diluted weighted average total shares outstanding decreased by 8% to 217.8 million(2) compared to third quarter 2021.
• Adjusted EBITDAX(1) was $386.0 million during the third quarter of 2022, driven by higher production and higher product prices as compared to prior year results. Total drilling and completions (“D&C”) capital during the third quarter was $114.5 million, representing just 30% of adjusted EBITDAX(1).
• Net cash provided by operating activities was $410.7 million during the third quarter of 2022 and the Company generated free cash flow(1) of $233.9 million. Magnolia generated operating income as a percentage of revenue of 65%.
• Total production in the third quarter of 2022 set a quarterly record for the Company, growing 21% compared to the prior-year quarter and 10% sequentially to 81.5 thousand barrels of oil equivalent per day (“Mboe/d”). Total volumes were 7% ahead of the high end of our production guidance range.
• During the third quarter, Magnolia repurchased a total of 3.0 million shares of Class A Common Stock, for $62.4 million, bringing the total Class A and Class B shares repurchased during 2022 to 13.1 million shares. At the end of the third quarter 2022, Magnolia had 9.3 million Class A Common shares remaining under its current repurchase authorization.
• As previously announced, the Board of Directors declared a cash dividend of $0.10 per share of Class A common stock, and a cash distribution of $0.10 per Class B unit, payable on December 1, 2022 to shareholders of record as of November 7, 2022. We expect our dividend to grow at least 10 percent annually and plan to revisit the dividend rate in early 2023.
• Magnolia returned 36% of the free cash flow generated during the third quarter through a combination of share repurchases and dividends while ending the period with $689.5 million of cash on the balance sheet. The Company remains undrawn on its $450.0 million revolving credit facility, has no debt maturities until 2026 and has no plan to increase its debt levels.

(1) Adjusted EBITDAX and free cash flow are non-GAAP financial measures.
(2) Weighted average total shares outstanding include diluted weighted average shares of Class A Common Stock outstanding during the period and shares of Class B Common Stock, which are anti-dilutive in the calculation of weighted average number of common shares outstanding. 

“The most recent quarter was filled with mixed emotions. We are humbled by our continued strong financial and operating results and performance, yet deeply saddened by the recent passing of Steve Chazen, Magnolia’s founder and former CEO. I am incredibly grateful for Steve’s guidance and counsel, his steadfast leadership and importantly his friendship. We expect his legacy to continue to live on through Magnolia for years to come,” said President and CEO Chris Stavros. “The principles of the business model that Steve established during Magnolia’s founding over four years ago are expected to remain unchanged. We will continue our discipline around capital spending, while maintaining low levels of debt. We expect our record of achieving moderate annual production growth, while generating significant free cash flow and strong pre-tax margins to continue.

“Magnolia delivered very strong financial and operating results in the third quarter of 2022 driven by record quarterly production and pretax operating margins of 65 percent, and despite a sequential quarterly decline in oil prices of more than $15 per barrel. Third quarter 2022 production increased 21 percent year-over-year and 10 percent sequentially, and well-above the high end of our earlier guidance. The stronger production was seen in both our Giddings and Karnes asset areas and was primarily the result of better than expected well performance. The results were achieved while spending just 30 percent of our adjusted EBITDAX during the quarter. We repurchased 3 million shares during the third quarter, reducing our diluted share count by 8 percent from the same period last year. Including share repurchases and dividends, Magnolia returned more than a third of the free cash flow generated during the quarter to our shareholders while ending the period with nearly $700 million of cash.

“I am pleased to announce that Brian Corales, Magnolia’s VP, Investor Relations, has been promoted to the position of Chief Financial Officer. Brian has done an excellent job at Magnolia since 2018 in helping to both manage and communicate the Company’s strategy as well as shaping our message to the broad Financial Community and other stakeholders. Magnolia’s strong focus on its shareholders and emphasis on generating improved stock market value over time make Brian uniquely qualified to serve as CFO. The selection and elevation of a qualified internal candidate to the CFO role is indicative of Magnolia’s strong “bench” of talent within our team.”

Operational Update

Third quarter 2022 total company production averaged 81.5 Mboe/d, representing a 10 percent sequential increase and was 21 percent higher than the prior year’s third quarter. Compared to the same period last year, Giddings and Other production increased 30 percent. Overall production exceeded our expectations during the quarter despite spending just 30 percent of adjusted EBITDAX on drilling and completing wells. Production was above the high end of our guidance due to stronger well performance in both of our operated areas, ongoing operating efficiencies, and slightly higher non-op activity.

Magnolia continues to operate two drilling rigs and expects to maintain this level of activity through next year. One rig will continue to drill multi-well development pads in our Giddings area. The second rig will drill a mix of wells in both the Karnes and Giddings areas, including some appraisal wells in Giddings. Magnolia continues to drive operating efficiencies, especially in the Giddings area. When comparing the 2022 total cost per stimulated foot for its development wells to the wells drilled in 2019, well costs per stimulated foot during this year have declined by 26 percent, despite the inflationary environment seen in oil field service costs. This improvement is directly attributable to the efficiencies that our operations and supply chain teams have captured at Giddings which include faster drilling and completion times, longer laterals, multi-well pads and improved asset knowledge.

KeyFacts Energy Industry Directory: Magnolia Oil & Gas